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Did Hedge Funds Make The Right Call On Alnylam Pharmaceuticals, Inc. (ALNY) ?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. We are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article we look at how hedge funds traded Alnylam Pharmaceuticals, Inc. (NASDAQ:ALNY) and determine whether the smart money was really smart about this stock.

Is Alnylam Pharmaceuticals, Inc. (NASDAQ:ALNY) a buy right now? The best stock pickers were buying. The number of bullish hedge fund bets went up by 1 in recent months. Our calculations also showed that ALNY isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). ALNY was in 34 hedge funds’ portfolios at the end of March. There were 33 hedge funds in our database with ALNY holdings at the end of the previous quarter.

Video: Watch our video about the top 5 most popular hedge fund stocks.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

David Harding

David Harding of Winton Capital Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s take a look at the key hedge fund action regarding Alnylam Pharmaceuticals, Inc. (NASDAQ:ALNY).

How have hedgies been trading Alnylam Pharmaceuticals, Inc. (NASDAQ:ALNY)?

At the end of the first quarter, a total of 34 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 3% from the fourth quarter of 2019. By comparison, 26 hedge funds held shares or bullish call options in ALNY a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Farallon Capital held the most valuable stake in Alnylam Pharmaceuticals, Inc. (NASDAQ:ALNY), which was worth $163.3 million at the end of the third quarter. On the second spot was Maverick Capital which amassed $145.8 million worth of shares. 12 West Capital Management, Slate Path Capital, and Casdin Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Casdin Capital allocated the biggest weight to Alnylam Pharmaceuticals, Inc. (NASDAQ:ALNY), around 6.76% of its 13F portfolio. Slate Path Capital is also relatively very bullish on the stock, earmarking 5.99 percent of its 13F equity portfolio to ALNY.

As one would reasonably expect, specific money managers were breaking ground themselves. Partner Fund Management, managed by Christopher James, initiated the largest position in Alnylam Pharmaceuticals, Inc. (NASDAQ:ALNY). Partner Fund Management had $8.9 million invested in the company at the end of the quarter. Henrik Rhenman’s Rhenman & Partners Asset Management also initiated a $8.7 million position during the quarter. The following funds were also among the new ALNY investors: Cliff Asness’s AQR Capital Management, Arsani William’s Logos Capital, and David Harding’s Winton Capital Management.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Alnylam Pharmaceuticals, Inc. (NASDAQ:ALNY) but similarly valued. We will take a look at MPLX LP (NYSE:MPLX), Laboratory Corp. of America Holdings (NYSE:LH), Cincinnati Financial Corporation (NASDAQ:CINF), and Kansas City Southern (NYSE:KSU). All of these stocks’ market caps are similar to ALNY’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MPLX 11 179942 -4
LH 45 1054505 -8
CINF 31 484343 0
KSU 45 524207 5
Average 33 560749 -1.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 33 hedge funds with bullish positions and the average amount invested in these stocks was $561 million. That figure was $841 million in ALNY’s case. Laboratory Corp. of America Holdings (NYSE:LH) is the most popular stock in this table. On the other hand MPLX LP (NYSE:MPLX) is the least popular one with only 11 bullish hedge fund positions. Alnylam Pharmaceuticals, Inc. (NASDAQ:ALNY) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th but still beat the market by 15.5 percentage points. Hedge funds were also right about betting on ALNY as the stock returned 36.1% in Q2 and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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Disclosure: None. This article was originally published at Insider Monkey.